What are the main components of the 2026–27 Federal Budget tax reform package?

The proposed package focuses on creating a fairer tax system for workers, first home buyers and future generations; a better tax system that encourages business investment and innovation; and a simpler, more sustainable tax system.

How will the capital gains tax discount change?

From 1 July 2027, the 50% capital gains tax discount is proposed to be replaced with cost base indexation for CGT assets other than new homes. A minimum tax of 30% on realised gains is also proposed to apply from that date.

How will discretionary trusts be taxed under the proposed reforms?

Trustees of discretionary trusts are proposed to face a minimum tax rate of 30% from 1 July 2028. A three-year rollover relief window is also proposed for businesses that wish to restructure before the change.

What is the Working Australians Tax Offset?

The proposed Working Australians Tax Offset, or WATO, would provide eligible working Australian taxpayers with a $250 offset beginning in the 2027–28 income year.

What changes are proposed for negative gearing?

From 1 July 2027, negative gearing for residential property is proposed to be limited to newly built properties. Existing arrangements held before Budget night are expected to remain unchanged.

Will workers need receipts for work-related expense deductions?

From the 2026–27 income year, workers are proposed to be able to reduce their taxable income by up to $1,000 for eligible work-related expenses without keeping receipts.

What is changing with the Medicare levy thresholds?

The low-income thresholds for the Medicare levy are proposed to increase by 2.9% from 1 July 2025 for singles, families, seniors and pensioners.

Are foreign ownership restrictions on Australian housing being extended?

Restrictions on foreign ownership of established housing are proposed to continue until mid-2029, alongside measures to strengthen Australia's foreign investment framework.

What is Division 296 and how may it affect superannuation balances?

Division 296 proposes an additional 15% tax on earnings associated with total superannuation balances above $3 million. SMSF trustees and members with high superannuation balances should review their circumstances before 30 June 2026.

Is the $20,000 instant asset write-off becoming permanent?

The Budget proposes making the $20,000 instant asset write-off permanent from 1 July 2026 for eligible small businesses using the simplified depreciation rules.

What changes are proposed for company tax loss carry-back rules?

From 1 July 2026, companies with annual turnover of up to $1 billion are proposed to be able to carry back eligible tax losses for up to two years.

What tax refund support is proposed for start-ups?

From 1 July 2028, eligible small start-ups in their first two years of operation are proposed to be able to receive cash refunds for tax losses, capped by the value of employment-related tax remittances.

How will the Research and Development Tax Incentive change?

Proposed reforms from 1 July 2028 include higher offsets for experimental core research and development, expanded refundability for eligible young fast-growing businesses, and an increase in the expenditure cap to $200 million.

What changes are proposed for venture capital tax incentives?

The Venture Capital Limited Partnership and Early Stage Venture Capital Limited Partnership incentives are proposed to expand from 1 July 2027. The eligible venture capital investor program is proposed to close to new applications from 7:30 PM AEST on 12 May 2026.

What changes are proposed for small business tax reporting?

From 1 July 2027, access to monthly reporting and payment options and dynamic PAYG instalment calculations is proposed to expand for eligible small and medium businesses.

What housing investment is included in the Budget?

The Budget includes a proposed $2 billion Local Infrastructure Fund intended to support up to 65,000 new homes over the decade, bringing total housing infrastructure investment to approximately $6.3 billion.

What defence investment is included in the 2026 National Defence Strategy?

The 2026 National Defence Strategy includes a proposed additional $53 billion in defence funding over ten years.

How can Lynden Group help businesses respond to the Budget changes?

Lynden Group can provide tailored advice on how proposed tax, superannuation, business and regulatory changes may affect individuals, businesses and investment structures. Enquiries can be sent to info@lyndengroup.com.au.

Understanding the 2026–27 Federal Budget: Key Changes for International Businesses Expanding into Australia

Q: When was the 2026–27 Australian Federal Budget presented?

The Federal Treasurer, Dr Jim Chalmers, presented the 2026–27 Federal Budget at 7:30 PM AEST on 12 May 2026.

Q: What changes are proposed for individual income tax rates?

The tax rate applying to income between $18,201 and $45,000 is proposed to decrease from 16% to 15% on 1 July 2026 and then to 14% on 1 July 2027. The estimated maximum saving is $268 in the first year and $536 annually from 2027.

Hagar Lipa
May 13
5 min read

The Federal Treasurer, Dr. Jim Chalmers, presented the 2026–27 Federal Budget at 7:30 PM (AEST) on 12 May 2026. This budget proposes a comprehensive tax reform package with three main components:

A "fairer" tax system for workers, first home buyers, and future generations.
A "better" tax system for businesses that encourages investment and innovation.
A "simpler and more sustainable" tax system.

Below, I summarize the key income tax, business, and superannuation measures.

Key Income Tax Changes

Capital Gains Tax (CGT)

From 1 July 2027, the 50% CGT discount will be replaced with cost base indexation for all CGT assets, except new homes. A minimum tax of 30% on realized gains will also apply from that date.

Discretionary Trusts

Trustees of discretionary trusts will face a minimum tax rate of 30% starting 1 July 2028. There will be a three-year rollover relief window for businesses wishing to restructure before this change.

Individual Tax Rates

The tax rate on income between $18,201 and $45,000 will drop from 16% to 15% on 1 July 2026, and then to 14% on 1 July 2027. This change will save taxpayers up to $268 in the first year and $536 annually from 2027.

Working Australians Tax Offset (WATO)

Every working Australian taxpayer will receive a $250 WATO starting from the 2027–28 income tax year. Over 13 million workers will benefit, with 97% receiving the full amount.

Negative Gearing

Negative gearing for residential property will be limited to new builds starting 1 July 2027. Existing arrangements held before Budget night will remain unchanged.

Work-Related Expenses

From 2026–27, workers can reduce their taxable income by up to $1,000 for work-related expenses without needing to keep receipts. This will benefit around 6.2 million taxpayers.

Medicare Levy Thresholds

The low-income thresholds for the Medicare levy will increase by 2.9% from 1 July 2025 for singles, families, and seniors.

Foreign Ownership Restrictions

Restrictions on foreign ownership of established housing will be extended to mid-2029. Additionally, Australia’s foreign investment framework will be strengthened.

Private Health Insurance Rebate

The age-based uplift of the private health insurance rebate will be removed from 1 April 2027.

Pension Supplement

The full rate of pension supplement will be extended from 6 weeks to 12 weeks for recipients temporarily absent from Australia. It will cease for those permanently overseas or absent for more than 12 weeks.

Superannuation Changes

Additional Tax on High Balances

The budget continues implementing Division 296, which imposes a 15% additional tax on earnings for total superannuation balances above $3 million. SMSF trustees and high-balance members should review their positions before 30 June 2026.

Concessional Contribution Settings

Concessional contribution settings have been adjusted as part of the broader tax reset. I recommend that all SMSF clients consult our team to assess the impact on their individual arrangements.

Business Tax Reforms

Fringe Benefits Tax (FBT) Discount

Australia will transition to a permanent 25% FBT discount for certain electric vehicles starting 1 April 2027 for eligible EVs over $75,000. All eligible EVs will qualify from 1 April 2029.

Instant Asset Write-Off

The instant asset write-off of $20,000 for small businesses using simplified depreciation rules will become permanent from 1 July 2026.

Carry Back Tax Losses

Companies with up to $1 billion in turnover will be able to carry back tax losses for up to two years starting 1 July 2026. This change will benefit up to 85,000 companies.

Cash Refund for Start-Ups

Small start-ups in their first two years of operation will be able to receive a cash refund for tax losses, capped at the value of tax remittances related to employment, starting 1 July 2028.

R&D Tax Incentive Reforms

Reforms to the R&D Tax Incentive will take effect from 1 July 2028. These include higher offsets for experimental core R&D, expanded refundability for young fast-growing firms, and an increased expenditure cap of $200 million.

Venture Capital Tax Incentives

The VCLP and ESVCLP tax incentives will be expanded from 1 July 2027 to reflect modern company valuations. The eligible venture capital investor program will close to new applications from 12 May 2026 at 7:30 PM (AEST).

Global and Domestic Minimum Tax Legislation

The global and domestic minimum tax legislation will be amended from 1 January 2026 to implement the OECD/G20 side-by-side package agreed on 5 January 2026.

Personal Services Income & Tax Residency

PSI rules and tax residency settings are flagged as part of what advisers are calling a 'seismic tax reset.' If you operate through a company or trust and derive income primarily from your personal skills, or if you have international connections or split time between Australia and overseas, I recommend speaking with our team to assess your exposure.

Not-for-Profit Sector

The deductible gift recipients (DGR) list will be updated to reflect current needs and priorities.

GST and Other Indirect Tax Changes

Indirect Tax Refunds

Access to refunds of indirect tax under the Indirect Tax Concession Scheme has been extended.

Abolishing Nuisance Tariffs

More nuisance tariffs will be abolished starting 1 July 2026.

Duty Exemption for Ukraine

The duty exemption for goods imported from Ukraine will be extended for an additional two years, lasting until 3 July 2028.

Combating Illicit Tobacco Market

Funding will be provided and measures introduced to combat the illicit tobacco market.

Tax Administration Improvements

Monthly Reporting and Payments

Access to monthly reporting and payments, along with dynamic PAYG installment calculations, will be expanded for small and medium businesses starting 1 July 2027.

Protecting the Tax System

Funding will be allocated to protect and strengthen the tax system against fraud.

Strengthening Governance

Funding will be provided from 2026–27 to enhance governance requirements, supervision, and enforcement concerning managed investment schemes.

Digital ID System Security

Funding will be allocated to the ATO and other government organizations from 2026–27 to meet commitments under the Digital ID Act 2024 and maintain the security and reliability of the government's Digital ID System.

Streamlining Regulatory Systems

Funding will be provided over two years from 2026–27 to streamline regulatory systems and secure access to data. This includes synchronizing director information, uplifting ABN authentication, and completing the transition of ABN and superannuation lookup functions to the ATO. Legislation will also be introduced to improve regulation in the financial sector.

Child Support Scheme Reforms

Funding will be allocated from 2026–27 to address systems abuse in the child support scheme. This includes strengthening tax lodgment enforcement, extending Single Touch Payroll data sharing, and expanding employer withholding to ensure more child support is paid in full and on time.

Payroll Tax Administration Frameworks

Reforms to harmonize state payroll tax administration frameworks will be explored as part of the government's national competition policy (NCP).

Cyber Security & Digital Initiatives

Budget Allocations for Cyber Security

The budget includes allocations for Essential Eight uplift and critical infrastructure cyber resilience. For SMB clients, digital security investments may now attract additional government support.

Lynden Group's Cyber Advisory Practice

Lynden Group's dedicated cyber advisory practice can help clients assess eligibility for government support, structure capital expenditure tax-efficiently, and align security investment with broader business planning.

Housing, Infrastructure & Defence Investments

Local Infrastructure Fund

A $2 billion Local Infrastructure Fund will support up to 65,000 new homes over the decade. Total housing infrastructure investment reaches $6.3 billion.

National Defence Strategy

The 2026 National Defence Strategy commits an additional $53 billion over ten years, marking the largest defence investment in Australia's history.

Transport Infrastructure Pipeline

A rolling transport infrastructure pipeline of over $120 billion over ten years includes significant projects like the $812.5 million Bruce Highway upgrade in Queensland and $3.8 billion for Victoria's Suburban Rail Loop East.

Critical Minerals Strategic Reserve

The Government is investing up to $1 billion in the Boyne Island Aluminium Smelter and has established a Critical Minerals Strategic Reserve targeting antimony, gallium, and rare earth elements.

For tailored advice on how these Budget changes may affect you, your business, or your investment strategy, contact Lynden Group. Our team can help you navigate the evolving tax, business, and regulatory landscape with practical, commercially focused guidance.

Email: info@lyndengroup.com.au